WTO REGIONAL DOMESTIC
OUTREACH PRESENTATION

Introduction

[Slide 1: Title slide]

• I’d like to join my colleagues in welcoming you to this WTO listening session. This session is part of the preparation for the Third World Trade Organization Ministerial Conference, which the United States is hosting in Seattle this November. The meeting in Seattle will kick off a trade negotiation among 134 nations.

• Last year, in Geneva, at the 50th anniversary of the world trading system, President Clinton commented on the importance of open trade to all nations. He also highlighted the need for the WTO to provide a transparent and open forum where business, labor, environment, and consumer groups can provide regular and continuous input to help guide further evolution of the WTO.

• That is exactly what we are trying to do with this series of listening sessions around the country: Get your input to help shape our agricultural trade policies for the new round of negotiations under the WTO as we enter the new millennium.

• We appreciate the time and effort that you have made to attend this session today. As we prepare for the beginning of a new round of multilateral negotiations, it is critical that we hear–and understand–the issues that should be priorities for us. This will help in developing the U.S. negotiating strategy.

• As you are fully aware, while our national economy has been booming, it has been a year of struggle and hardship in many parts of rural America. We at USDA , from Secretary Glickman on down, recognize that much of agriculture is going through a very difficult period right now.

• At USDA we are marshaling all of our resources to address this economic situation. We are making sure that emergency economic relief gets to producers as soon as possible, that strengthening of the farm safety net is at the top of the agenda, that the consolidations and mergers sweeping agriculture are subject to proper scrutiny and that we continue to press to open new markets for our exports.

[Slide 2: presentation summary]

• We would like now to make a brief presentation that will set the stage for our discussions today. We will address the following areas: 1) the critical role that exports already play for agriculture ; 2) the role that trade agreements have played in obtaining the current level of agricultural exports; 3) our goals for the upcoming WTO round of negotiations. After our presentation, we expect to hear from you, the people most directly affected by agricultural trade agreements. We need to hear your experiences with trade agreements -- what is working, what is not and how to move forward.

I. THE CASE FOR EXPORTS

Exports are Critical for Agriculture

• I would like first to share with you some important facts showing that exports are critical for U.S. agriculture.

[Slide 3: Exports are Critical for US Agriculture]

• U.S. agricultural exports reached $53.6 billion in 1998. Agricultural exports support nearly 750, 000 jobs. Products of nearly 1 to 3 harvested acres are destined for overseas. Even in the current downturn, about 25% of agricultural sales are export sales, compared with 10% on average for the rest of the economy. The vast majority -- 96%-- of potential customers for U.S. products, including agricultural products, live outside the United States. We must work to increase our opportunities to sell into these global markets.

[Slide 4: Compared to the general economy, U.S. agriculture’s reliance on export markets is higher and projected to grow faster]

• Access to customers in foreign markets is a key factor to the health of U.S. agriculture. Compared to the general economy, U.S. agriculture’s reliance on export markets is higher and projected to grow faster. Agriculture is already more reliant on exports than the economy as a whole.

[Slide 5: Trends in Agricultural Exports]

• Other factors point to the increasing importance of exports:

1) The overall trend has been one of increasing exports for American agriculture. U.S. agricultural exports climbed to nearly $60 billion in 1996 up from $40 billion at the beginning of the 1990s. Exports were down last year and likely will be down for 1999 as well, due to record world-wide crop production, the Asian financial crisis, and the strong dollar-- agricultural exports in 1998 were $53.6 billion, and we project exports of $49 billion in 1999.

However, when the global economy rebounds, the trend of increasing exports is predicted to continue, and exports will account for a larger percentage of farm income.

[Slide 6 : Shows high percentage of exports for products where US agriculture has comparative advantage]

2) The 1996 Farm Bill increased the market orientation of agriculture and so to be prosperous in an increasingly competitive market, we must increase our exports in those areas where we have the comparative advantage. Certain agricultural sectors, such as almonds, are already exporting more than 60% of production.

[Slide 7: Ag products with more than $ 1 billion in export sales]

Export sales are over $1 billion annually for a number of food and agricultural products.

3) U.S. agricultural productivity is increasing while domestic demand for agricultural products is growing slowly. Therefore we must develop new overseas markets for our products.

[Slide 8: Gross farm equity tracking exports]

• Another factor pointing to the importance of exports to agriculture is how closely the level of our farm equity has tracked the level of exports over time.

• Expanding export markets, while certainly not the only tool, is a very important tool for leading us out of the slump in agriculture. We must be realistic: exports are projected to decline again in 1999 to $49 billion. It is estimated that 45% of the world’s economy outside the United States is now suffering recession or depression –until the global economy turns around we will not immediately increase our global customer base. But as a long -term strategy, expanding our export markets is critical.

II. THE CASE FOR TRADE AGREEMENTS

The Way to Increase Exports is through Trade Agreements that Open Markets

• A key to expanding export markets and increasing our access to customers outside the United States is through trade agreements that are good for American agriculture. We would not be at the level of exports we are at today if we had not negotiated trade agreements such as the WTO or the North American Free Trade Agreement (NAFTA).

[Slide 9 : Dwyer slide on trade agreements/exchange rates/exports]

• Trade agreements have boosted exports. Soon after the implementation of the Uruguay Round, U.S. agricultural exports reached their highest level. Now many factors, including exchange rates, factor into any rise in exports. But almost all economists agree that lowering trade barriers through trade agreements has been a critical factor.

[Slide 10: Estimated Gains of Recent Trade Agreements for U.S. Agriculture]

• It is estimated that in 2005 agricultural exports will be $ 5 billion more annually than they would have been without the Uruguay Round agreement. Other trade agreements have similarly provided benefits. It is estimated that in 1994 we sold $1.29 billion more beef and citrus to Japan than we would have without the trade agreement we successfully negotiated with Japan. For export growth to continue, we must move forward with our strategy for opening markets through trade agreements.

[Slide 11: NAFTA slide]

• NAFTA is also fulfilling its promise for agriculture. Our NAFTA partners, Canada and Mexico, have become more important destinations for U.S. products, now accounting for over 25% of U.S. exports sales, surpassing the EU. We estimate that in the first three years, NAFTA can take credit for 3% additional exports to Mexico and 7% additional exports to Canada. The 11% growth from 1997 to 1998 in exports to Mexico and Canada was especially welcome as overall exports fell 6%, thus helping to offset the sales declines to several of our leading Asian markets.

• On the other hand, we recognize that although we have achieved many benefits for agriculture from recent trade agreements, the playing field is far from level and there is much work to be done.

III. Goals for Upcoming WTO Round

• A major part of our strategy to level the playing field for agriculture is to be successful in the upcoming WTO round of negotiations.

WTO Next Round

[Slide 12: world trading system background]

• To understand where we are going in the WTO, it is important to understand where we have been. The General Agreement on Tariffs and Trade, the GATT, was established in 1948 and set the basic rules for international trade. A number of multilateral GATT negotiations, or "rounds", took place between 1948 and the present , with the most recent round – the Uruguay Round-- concluded in 1994. The Uruguay Round established the World Trade Organization, or WTO, which is basically a continuation of the GATT system.

[Slide 13: Uruguay Round Results]

• The Uruguay Round Agreements opened a new chapter in agricultural trade policy, committing countries around the world to new rules and specific commitments to reduce levels of protection and support that were barriers to trade. Agriculture finally became a full partner in the multilateral trading system.

• For the first time, countries had to make across-the-board cuts in agricultural tariffs. For the first time, export subsidies had to be reduced, and internal support policies that distort trade were capped and reduced. New rules set a scientific standard for measures that restrict imports on the basis of human, animal, or plant health and safety. And a new dispute-settlement process was adopted -- one that we have successfully used in a number of cases.

• For example, we recently won dispute-settlement panels against the European ban on beef from cattle treated with growth hormones, against the EU’s banana import licensing regime, against Japan’s restrictive quarantine requirements for fresh fruit, and Canada’s dairy policy on subsidies. We now must maintain a firm line to ensure that the banana and hormones decisions are carried out so that U.S. exporters have the access determined to be their legal right.

• The Uruguay Round agreement was a good start. It has already contributed to increased U.S. agricultural exports and higher farm incomes as American producers have taken advantage of newly opened markets and new opportunities. But the Uruguay Round was just a start -- the first important steps in global agricultural trade reform. We are now planning for the next major step -- the round of WTO agricultural trade negotiations.

Next Round of Multilateral Ag Trade Negotiations

• The next round of WTO negotiations will be kicked off at a ministerial meeting in Seattle from November 30-December 3 of this year. The ministerial meeting will be a major event with representation by most of the 134 member countries. We also expect strong private sector attendance.

• The actual negotiations will start early in 2000. The scope of coverage of the negotiations is yet to be finally determined, but agriculture and services will definitely be included. The general expectation is that the negotiations should last 3 years with implementation beginning in 2004.

[Slide 14 :Tariffs must be Reduced in Next WTO Round]

• In setting the agenda for the next WTO round of agriculture negotiations, we will build on the Uruguay Round accomplishments. Tariffs were reduced in the Uruguay Round, but they are still too high, with some countries maintaining average agriculture tariffs of 50%, while the U.S. tariffs average about 8% on agricultural products. It is our goal to negotiate the further reduction of tariffs. We also want to expand market access under tariff-rate quotas by increasing the quota amount and decreasing the tariff outside the quota.

[Slide 15: Export Subsidies]

• We also want to see the reduction or elimination of export subsidies, especially for the EU. The EU has outspent the U.S. by more than 20 to 1 on export subsidies ($ 7 billion to $100 million in 96/97).

• Another problem in agricultural markets are state trading enterprises or STEs, government entities that act as monopolies. When as STE has government authority and monopoly power they may be able to price their products artificially low and unfairly increase market share. It is important that we develop stricter WTO rules to ensure that STEs operate in a fair and transparent manner.

[Slide 16: comparison of trade distorting domestic support]

• Trade distorting domestic support is being reduced under the WTO rules, but the job is not yet complete. A comparison of the levels of such support shows that globally, including in the United States, but particularly in Europe and Japan domestic support remains high. Our goal for the next round is to make sure that the assistance other governments give to agriculture is provided in ways that do not interfere with markets. But generous subsidy programs that encourage farmers to produce as much as possible without regard to efficiency or environmental costs can only be sustained by keeping out the competition and dumping surplus production on world markets.

• Other goals for the Round include:

• ensuring that the existing strong agreement requiring that barriers related to health and safety issues (the SPS agreement) continues to be based on sound science.

• finding better ways to facilitate trade in products resulting from scientific innovation, including biotechnology.

[Slide 17: U.S. Goals for Next WTO Agriculture Negotiations]

• Trade reform through the WTO provides the biggest bang for the buck. In one agreement, for example, we can get 134 countries to cut tariff barrieers on exports. But getting all these countries to agree on major reforms will take a lot of time and effort. It won’t be easy.

• The United States has already completed much preparatory work in Geneva, where the WTO is located. We are using the WTO Committee on Agriculture to identify places where current rules and commitments don’t go far enough to open up markets for our exports. At the same time, we are using a less formal process to build a consensus and prepare the ground for the tough negotiations to come.

Continuing Participation

• Input from those who will be most affected by the results of the WTO negotiation – that is you here today-- is critical both at this early stage and as USDA and USTR work together in the negotiating process. We need your support and suggestions including any specific proposals you may have for our negotiations.

• You can make your voice heard on these issues by making your views known to your local farm groups and state government representatives in the legislature or the executive branch. Many of you are represented on our Agricultural Trade Advisory Committees. We encourage you to bring your ideas for the WTO to the upcoming meetings.

• In all our activities, we want to send a clear message to the rest of the world that agriculture is a top priority for the United States and that we remain fully committed to open markets and fair trade. But we need your support and advice to make sure that trade agreements continue to work for American farmers and for U.S. agribusiness.

[Slide 18: website]

• Please do not hesitate to send us your views via the internet or in a letter to USDA or to USTR.

CONCLUSION

• In conclusion, U.S. agriculture is already a globalized industry. It is inevitable that globalization in agriculture will continue.

• To establish the best international rules for U.S. agriculture we must stay engaged in the negotiation of trade agreements.

• Our next major opportunity is the upcoming WTO round.

• Thanks you for your interest today, and we hope, throughout these important negotiations.

END

Last modified: Friday, November 18, 2005